It's a well-documented fact that if you're looking for a bargain on a home, Phoenix is a great place to start your search – but you better have plenty of cash available if you want to play the game.
In 2012, 34% of all home sales in the metropolitan Phoenix area were foreclosure-related. As a result, for the last few years, droves of investors have been flocking to the Arizona desert to scoop up foreclosed homes. They're fixing them up, renting them out, and playing the waiting game. Then, when home prices go up, they’re hoping to sell those homes for a substantial profit.
However “traditional” buyers who want to purchase a home as their primary residence have become frustrated, because they often lose out to these investors. While the prospective homebuyers are busy applying for mortgages, the investors are out offering sellers cash. Because they’re doing cash-only transactions, they can work much faster than “traditional” buyers.
And, it doesn't look like the out-of-town competition is going anywhere soon. While the number of foreclosure sales in Phoenix is decreasing, short sales are on the rise. A recent study by real estate research firm RealtyTrac indicates that banks are opting to take significant losses on homes through short sales rather than go through the lengthy and expensive foreclosure process, and buyers are taking notice. Short sales in the Phoenix area went up a whopping 43% during the fourth quarter of 2012, when compared to the fourth quarter of 2011. Those numbers led RealtyTrac to name Phoenix the 14th best city to buy a short sale.
But why are short sales so popular here?
For starters, people love the bargains that come with short sales! Plus, it's a lot easier to buy this type of distressed property compared to a foreclosure. The average short sale in the Phoenix area sold for $149,094 during the fourth quarter, and took slightly more than six months to close. Compare that to foreclosures, which can sometimes take multiple years and several court hearings before the transactions are finalized.
Foreclosures aren't just time consuming, they're also expensive for banks, so many are opting to go the short sale route instead, even if it means taking a loss. The average amount short – meaning the difference between the sales price and the amount owed to the bank – was $98,479 in the metropolitan Phoenix area during the fourth quarter of 2012. That is significantly higher than the nationwide average of $81,621, but that figure is down 7% from the year before, meaning that banks are working hard to limit their losses on the sales of these distressed properties.
There aren't many foreclosures still available in Phoenix – or any type of home for that matter – and the limited inventory has driven home prices sky high in the metro area in recent months. Normally when that happens, investors stop buying properties, and begin to think about selling the ones they've already purchased. But in Phoenix, with so many short sales still available, don't expect the investors to put away their wallets any time soon.
Like “traditional” buyers, these investment firms are keeping their eyes on the market, and they have noticed the recent trend of banks opting for short sales. Since 43% of all Phoenix-area home sales in 2012 were distressed properties, you can expect investors to be the primary buyers here for as long as they are available.
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